Definition

The term continuous contract refers to an agreement that can be renewed until one of the parties provides notice of termination. Unlike a reinsurance contract, continuous contracts do not specify an end date of the agreement.

Explanation

A continuous contract is one that, once entered into, does not have an end date. That is to say, and at the discretion of the parties to the agreement, the contract can be renewed indefinitely and remains in-effect until one of the parties chooses to terminate the agreement. These types of contracts are a subset of reinsurance contracts.

Typically associated with the insurance industry, continuous contracts will define not only the hazards that are covered under the agreement, but also the process to provide a notice of termination. For example, the agreement might state it can be terminated in 90 days following the receipt of written notice by any party.

One year renewable term life insurance is an example of a continuous contract. The coverage of the agreement is 12 months. However, the insured has the option of renewing the agreement each year simply by paying their annual premium.